Baring EQT, ChrysCapital acquire HDFC's education loan arm for $1.1 bln (updated)

Housing Development Finance

20/06/2023 07:41

(Repeats for wider distribution with no changes to text)
    By Siddhi Nayak, M. Sriram and Indranil Sarkar
       MUMBAI/BENGALURU, June 20 (Reuters) - BPEA EQT and
ChrysCapital will buy a 90% stake in Housing Development Finance
Corporation's  HDFC.NS  education finance arm HDFC Credila for
90.60 billion rupees ($1.11 billion), marking India's
largest-ever private equity (PE) buyout in the financial
services sector.
    The deal comes as more investors bet on the country's
aspirational middle class and a rising number of international
students who could potentially take total spending to $75
billion-$85 billion in 2024, according to Credila's annual
report. 
    The deal will also help the mortgage lender adhere to the
mandated regulatory requirements before its $40 billion merger
with HDFC Bank proposed to be completed next month. India's
central bank had asked HDFC to reduce its shareholding in HDFC
Credila to 10% within two years of the effective date of the
merger. 
    "This is a win-win deal for both HDFC and the PE firms,"
said Kranthi Bathini, equity strategist at WealthMills
Securities. "These PE firms are betting big on India’s long-term
proposition and a favourable demographic dividend that will
boost the market for education loans further."   
    In addition to buying out HDFC Credila, the PE firms will
also infuse primary money of 20 billion rupees.
    BPEA EQT combines the private equity teams from Baring
Private Equity Asia (BPEA) and EQT Asia. BPEA is one of Asia's
biggest PE firms managing more than $22 billion, while
ChrysCapital is a prominent Indian name in the space.
    Monday's deal is PE's second education loan bet in India
this year. Kedaara Capital invested around $100 million in
education-sector lender Avanse Financial Services, which was
also backed by Warburg Pincus, in January.    
    The number of Indian students opting for higher education
overseas has been surging, with the U.S., UK and Canada seen as
favourable destinations.
    International student growth jumped 68% year-on-year in 2022
as well as outpaced domestic student growth by more than
six-fold over the last three years, according to Credila's
annual report.
    Outstanding education loans of Indian banks have also jumped
18% year-on-year as of April 21, against a 6.2% increase in the
year-ago period, according to Reserve Bank of India data.   
    Post the stake sale, HDFC will retain a 9.99% share in its
education finance unit, which has extended loans to over 1.24
lakh customers since its inception in 2006.
    Jefferies acted as the exclusive financial advisor to HDFC
and HDFC Credila on the deal, which is subject to regulatory
approvals from the RBI and the Competition Commission of India.
    
($1 = 81.9480 Indian rupees)

 (Reporting by Siddhi Nayak and M. Sriram in Mumbai and Indranil
Sarkar in Bengaluru; Editing by Janane Venkatraman)
 ((Siddhi.Nayak@thomsonreuters.com; +91 22 6921 7848;))